Working Group III mandated with ISDS Reform

On 14 July 2017, following its fiftieth annual session, the United Nations Commission on International Trade Law (UNCITRAL) announced that Working Group III (WGIII) has been entrusted with a broad mandate to identify concerns regarding Investor-State dispute settlement (ISDS) and explore whether reform is desirable.[1] The Commission has tempered this broad discretion by permitting States to choose the extent to which they will adopt any recommended solutions.[2]

The decision follows growing criticism of the current ISDS regime by both States and their constituencies, including concerns regarding the appointment of arbitrators (in particular, that arbitrators are being drawn from a limited pool of specialised lawyers), impartiality and independence of tribunals, a lack of cohesion in decisions resulting from ad hoc tribunals, a lack of review mechanisms, the cost of proceedings and lack of transparency.[3]  The net effect of these complaints “in essence reflect concerns about the democratic accountability and legitimacy of the regime as a whole”[4] regardless of the legitimacy of the ISDS regime under international law.   

Against that backdrop, and in response to proposals for reform from a number of organisations, the UNCITRAL Secretariat conducted a study in conjunction with the Centre for International Dispute Settlement of the University of Geneva and the Graduate Institute of International Development Studies  (CIDS Report) which sets out a roadmap of the issues and possible solutions that should considered if true multilateral reform is to be achieved.[5]

The CIDS Report identified two key reforms: the design of a single International Tribunal for Investments, or alternatively, the design of a universal appeal mechanism for investor-State arbitral awards to a permanent appeal body, as well as the establishment of multilateral instruments allowing States to opt-in to the reforms in existing international investment agreements without the cost and hassle of making numerous amendments pursuant to the procedures set out in existing international arbitration agreements.[6]  It was concluded that this last proposal might be achieved in a similar manner to the Mauritius Convention on Transparency effectively extending new dispute settlement options to existing international arbitration agreements.

Further options for reform considered by the Commission as part of the mandate include: whether the adjustments may be made to the current ISDS regime (under the arbitration rules of UNCITRAL and ICSID) or whether a new permanent international investment court should be created, the viability of a stand alone appellate body, whether a code of conduct for arbitrators should be included in any regime, the desirability for a review mechanism, issues regarding enforcement of awards from a permanent international investment court and how such a court should be financed.[7]

Given the challenges involved in such reform, UNCITRAL has emphasised that deliberations will be government-led consistent with UNCITRAL’s processes saying while benefiting from the widest possible breadth of available expertise from all stakeholders, will be government-led with high-level input from all governments, consensus-based and be fully transparent.[8]

Dr Dalma Demeter observed the Commission deliberations about the mandate on 10 July. With two exceptions, delegates from most states were very supportive of the proposed mandate. The range of justifications for the mandate can be found in the Commission documents available online.[9]

One particular area of discussion was whether the mandate should be given to WGII or WGIII. WGII is currently working on the enforcement of settlement agreements, with both a convention and a model law being concurrently developed.[10] On the other hand, WGIII recently finalised its work on online dispute resolution (ODR),[11] leaving WGIII open and available for other work and this solution also avoided undue pressure being placed on WG II to complete its current mandate.

WGIII is set to convene in Vienna in Autumn 2017.

A copy of the CIDS Report can be found at the following link: http://www.uncitral.org/pdf/english/commissionsessions/unc/unc-49/CIDS_Research_Paper_-_Can_the_Mauritius_Convention_serve_as_a_model.pdf

 

Sara Rayment, Conjoint Associate Professor, University of Newcastle

Dr Dalma Demeter, University of Canberra

 

[1] http://www.unis.unvienna.org/unis/en/pressrels/2017/unisl250.html

[2] Ibid

[3] (A/CN.9/917) para 11

[4] (A/CN.9/917) para 12

[5] (A/CN.9/918), paras. 1-2

[6] (Official Records of the General Assembly, Seventy-first Session, Supplement No. 17 (A/71/17), para. 194

[7] (A/CN.9/917)

[8] http://www.unis.unvienna.org/unis/en/pressrels/2017/unisl250.html

[9] See series of Investor-State Dispute Settlement Framework – Compilations of comments, available at http://www.uncitral.org/uncitral/commission/sessions/50th.html

[10] See A/CV.9/896

[11] The Commission adopted the Technical Notes on Online Dispute Resolution at the 49th Session in 2016 (A/71/17) para 217.


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